How An Old Banking Regulation May Have Driven The 1970s Inflation

Odd Lots

Bloomberg

News, Investing, Business, News Commentary, Business News

4.4 • 1.6K Ratings

🗓️ 16 October 2023

⏱️ 51 minutes

🔗️ Recording | iTunes | RSS

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Summary

There remains a lot of anxiety over whether inflation in the US will gather steam all over again. Part of this worry stems from the fact that there were multiple bouts of inflation in the 1970s, which was the last time the US had a serious inflation problem. So to understand whether our current environment bears similar risks to that of the 70s, it's important to understand what actually drove inflation during that period. On this episode, we speak with Itamar Drechsler, a finance professor at Penn's Wharton school. He argues that the banking regulation known as Reg Q impaired the transmission of monetary policy, and resulted in a perverse dynamic via which rate hikes served to impair the supply side of the economy, rather than cool the demand side.

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0:53.8	Hello and welcome to another episode of the AdLots podcast.
0:58.0	I'm Joe, why isn't all?
0:59.1	And I'm Tracy Alloway.
1:01.2	Tracy, obviously, we're recording this September 2023.
1:05.5	Inflation has come way down over the last year,
1:08.9	but there is definitely anxiety about, well, could we see another way,
1:12.3	particularly if we don't have a recession?
1:14.0	Like, no one is really convinced that it's over.
1:17.7	Right, so gas prices are starting to creep up again.
1:21.3	House prices have been incredibly stable and also starting to rise slightly,
1:25.6	so that could also figure into shelter costs.
1:28.3	But I think, generally, there is this concern that are we going to see another leg up in inflation?
	...

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